You have options when it comes to how the property will be titled if you are recently married or have been married and are acquiring new assets. Also, even though shared tenancy appears to be a simple and practical choice, it could not function as effectively as you might expect.
What is Joint Tenancy?
It is typical for couples to take title to one another’s bank accounts, brokerage accounts, personal belongings, and other assets as joint tenants with rights of survivorship after being married (JTWROS). An asset with the title JTWROS is owned by at least two parties (or tenants), each of whom has an equal claim on the asset.
Survivorship rights are also granted to each tenant in the event that one of the other tenants passes away. For instance, if a married couple owns a bank account under the JTWROS designation and one spouse passes away, the account automatically passes to the remaining spouse as sole ownership. Although keeping the property as JTWORS may seem like a straightforward way to own your assets and avoid probate, there are certain drawbacks, particularly if you are married.
Problems with Joint Tenancy
When two people jointly hold an asset, there may be issues, particularly if the relationship is unstable. This is due to the fact that neither party may encumber (which includes, among other things, selling or refinancing) the property without the other’s approval. When dealing with bank accounts, there could be additional worries because both parties have full access to the account, meaning either one of them could visit the bank and withdraw money without the other’s permission.
Trying to use JTWROS as a tool for probate avoidance has problems as well. When one spouse passes away, the surviving spouse takes over ownership of the asset and is not required to follow the decedent’s instructions for how the property should be divided. This is especially dangerous when it comes to the separate (non-marital) property that has been inherited or passed down through the generations, such as a farm or ranch that belonged to the deceased’s spouse’s family.
JTWORS can also result in significant problems during a divorce. Furthermore, if the married pair signed into a prenuptial agreement prior to getting hitched, holding assets as JTWROS can be in conflict with it and have unforeseen consequences.
Better control and protection of the asset may be possible with proper estate planning, which includes setting up a trust to hold the asset. The correct estate plan will guarantee that you and your spouse can continue enjoying the asset as intended with a minimum of taxes and court fees, regardless of the reason for the asset’s loss—creditor problems, divorce, incapacity, or death.
For all of these reasons, it is crucial to speak with an expert in estate planning so that you are aware of your options when it comes to titling property. Contact us straight away to find out your choices if you recently got married or are acquiring new assets with your spouse. Contact Hudack Law today at (877) 314-4309 Toll-free, please visit areas of service (open link in a new tab) or hudacklaw.com (open link in a new tab).